There is an article in the Featured Articles section below by Larry Edelson titled Why Rising Rates Will Be Good for Your Investments. He is now looking for gold to bottom around $1000 in May.
Edelson has been waffling on his timing since last fall. It was November, then January and now May. Actually, the reason his yardstick is changing is because gold hasn’t hit “his” bottom yet. He won’t relent until gold falls to around $1000. On that, he is consistent. Will he be proven right? Don’t know, but he isn’t alone in predicting $1000 for gold – before it explodes by thousands of dollars.
What would stand in the way of Larry being wrong? A black swan event. Inability to deliver the required amount of physical gold to India and especially China.
Can these events be ruled out? No they can’t. That’s why waiting on a hypothetical bottom when the prediction also calls for $5000 or $10000 gold is also part of the same predictions. Don’t bottom fish. It’s a winning trade at the current level, or lower.
I am a big fan of Ted Butler. Ted indicts JPMorgan as the force behind the manipulation of silver (and gold). He is angry that they make billions while working outside the (commodity) law. There is no question that they control the markets. Their positions are so large that they set the price.
But hey, they do illegal things in virtually every market and are constantly being fined for their illegal manipulative actions, so this is nothing new. Just more blatant – but as long as they can get away with it, they will.
If you want to be angry, be angry at the regulators who are NOT doing the job they were paid (by us) to do. All of the Wall Street money center banks push the envelope in the name of profit. If they can get away with it, do it and do it well. That is their mantra. So we should simply face the fact that naked-shorting, front-running and painting-the-tape are a fact of life in the gold and silver arena.
The only pressure we can count on comes not from the CFTC but from the Peoples Republic of China. It comes in the form of the dollars-for-physical gold trade. The paper manipulation will (be allowed to) continue until there is not enough physical gold to send to Asia.
But there is an awful lot of gold out there, so how can we run out of gold to send to Asia? We can’t. It’s just a matter of price. How many dollars will it take for the owners to part with it and send it to China? Since the demand now far exceeds the annual supply, this is bound to happen. The normal excess supply, in London, the Comex and GLD is running very low. Once those sources of supply are exhausted (soon, I expect), the only thing that will draw out enough gold to satisfy Asian demand will be MUCH higher prices.
They may be able to push gold and silver a bit lower, but the unintended consequence is lower prices equals higher demand. Checkmate!
I can’t see how these low prices can continue much longer. The only question is will the move up be gradual and linear or explosive. I’m betting the later – especially because there is a huge short position that has to be covered and that adds fuel to the fire. It should be something to see, better yet as a holder of gold and silver so the fireworks are not merely intellectual, but financial.
At the close on Monday, both gold and silver closed up against their 50-day moving averages, a key indicator that most traders watch closely. Gold hasn’t crossed that line since late October, and even then, it only managed to hold its gains for five days before succumbing to another bout of selling.
The bulls are close to gaining control of the market but they’re not there yet.
Doug Davenport (Money and Markets) and Ed Steer both discuss the importance of gold and its 50-day moving average charts in the Featured Articles Section that follows. Both gold and silver were down (as usual) coming into NY but by 8:00 A.M., both gold and silver are still above their key 50-day moving average. I will be interested to see if they both can finish today above the MA.